Japan`s Pearl Harbor

May 8, 1986|By John Powers, Staff writer

As the economic summit ends in Tokyo, this might be the time to talk about an issue not widely discussed: The role oil played in creating Japan Inc., and the role oil from Alaska could play -- but won`t -- in easing our trade deficit with Japan.

As for the latter, selling oil from the North Slope of Alaska to foreign nations is prohibited by law. The law could be repealed. But that would create a snit among maritime interests. So the federal government believes it`s better to keep our barrier while still complaining about their barriers.

To begin, historically, Japan`s trade balance with the rest of the world was relatively in balance until recently. The Arab oil embargo of the early 1970s was the basis for the current lack of equilibrium.

If you were upset because you had to wait in line for gas and pay high prices when you got to the pump, consider how the Japanese felt. The United States has tremendous reserves of oil. In coal, we are the Saudi Arabia of the world.

But Japan is a volcanic island. It has no natural resources. It must import all its oil, for its industry and its consumers. The Arab economic oil war against the United States was Japan`s Pearl Harbor.

Before the boycott, Japan`s imports were about 9 percent of its gross national product. With oil price escalation, imports were soon 16 percent of GNP. Government and businesses did two things: (1) Shift resources toward energy efficiency and conservation and (2) place high emphasis on exporting manufactured goods to pay for the higher energy import bill.

Needless to say, the Japanese were very successful.

Now for the other side of the oil picture: U.S. exports to Japan.

It would seem to make sense, would it not, to sell oil to Japan? Sure it would. So what happened?

In 1973, when Congress authorized the trans-Alaska pipeline, it prohibited the sale of oil from the North Slope of Alaska.

You might ask why. Because at that time there was an energy crisis; it was desirable to keep every drop of oil in the United States.

But things have changed since 1973, you might point out. For one thing, a worldwide oil surplus exists. And since we have a trade deficit with a nation that must import all its oil, why not sell Alaskan oil to Japan?

Because of the Jones Act of 1920.

The what?

The Jones Act. It is a law. From 1920. It requires the use of American ships and crews on all shipments between U.S. ports. So, as long as oil is shipped from Alaska, which must be recognized as part of the United States, to ports in other parts of the United States, instead of, say, to Japan, it must be carried on U.S.-owned, maritime union-dominated ships.

That is why Congress has not seen the wisdom of repealing the prohibition against selling North Slope Alaskan oil.

True, it costs nearly nine times as much to ship Alaskan oil through the Panama Canal to Florida than to ship it to Japan.

True, it costs about $2 more a barrel than Mexican oil shipped to Florida, which must be paid for by consumers here.

True, the Japanese would buy about $20 billion of oil each year, which would offset almost half of our $49 billion trade deficit with Japan.

And, true, selling oil to Japan would make that nation less dependent upon the oil, and therefore the politics, of the Middle East.

But allowing the sale of North Slope oil, when weighed against the maritime interests, calls for the one natural resource that does not exist in Washington, D.C.: guts.